790 F.

2d 351

Ralph W. BERNARDO, Petitioner,

v.
DIRECTOR, OFFICE OF WORKERS' COMPENSATION
PROGRAMS, Respondent.
No. 85-3613.

United States Court of Appeals, Third Circuit.

Submitted Under Third Circuit Rule 12(6)
May 1, 1986.
Decided May 12, 1986.

Stephen W. Webster, O'Leno & Webster, San Marcos, Cal., for petitioner.
Francis X. Lilly, Sol. of Labor, Donald S. Shire, Associate Sol., J. Michael
O'Neill, Counsel for Appellate Litigation, Roscoe C. Bryant, III, U.S.
Dept. of Labor, Washington, D.C., for respondent.
Before SLOVITER and STAPLETON, Circuit Judges, and MENCER,
District Judge.* OPINION OF THE COURT
SLOVITER, Circuit Judge.

I.
1

Petitioner Ralph W. Bernardo filed a Petition for Review from the decision of
the Benefits Review Board affirming the denial of benefits under the Black
Lung Benefits Act, 30 U.S.C. Sec. 901 et seq. The petition, originally filed by
Bernardo in the United States Court of Appeals for the Ninth Circuit, was
transferred by that court to us after it declined jurisdiction, 772 F.2d 576.

According to Bernardo, he was born in 1909, worked in Pennsylvania coal

mines for a total of 17 years, from 1928 to 1946, worked in a steel mill until
1960, worked as a night maintenance supervisor in a restaurant until 1974, and
retired in 1974 at the age of 65. The Director does not deny these facts.

Bernardo first filed for benefits under the Black Lung Benefits Act on August
13, 1973. His claim was denied by the Department of Labor (DOL) in 1979,
and, on his request, the matter was heard by an Administrative Law Judge in
1981. Two medical reports were introduced. One was the conclusory opinion of
Dr. Arthur Nicolaysen that Bernardo "is unable to work in coal mines due to
chronic obstructive pulmonary disease, mild angina, hypertension, and his age
of seventy-one." The other opinion by Dr. James S. Otoshi included a series of
studies, among them ventilatory function studies, and contained the following
assessment:

4 patient has a mild restrictive lung defect with minimal functional impairment.
The
The etiology of the restrictive disease is unclear. Chest x-ray shows no clear
evidence of coal workers pneumoconiosis. However, it is quite possible that he has
some degree of interstitial fibrosis which is not present on the chest x-ray which
might have been due to exposure to coal dust or silica in the coal mines. There is no
other obvious cause for the mild restriction present.
5

The ventilatory function studies established the presence of chronic respiratory

or pulmonary disease by values which were equal to or less than the values
specified in the table of the applicable regulation, 20 C.F.R. Sec. 727.203(a).
Therefore, the ALJ held that Bernardo was entitled to the interim presumption
of disability pursuant to that regulation.

The ALJ held, however, that the presumption of disability had been rebutted as
provided in 20 C.F.R. Sec. 727.203(b)(3). Section 727.203(b)(3) permits
rebuttal when "[t]he evidence establishes that the total disability ... of the miner
did not arise in whole or in part out of coal mine employment." The ALJ
applied a recent Benefits Review Board decision, Jones v. The New River Co.,
3 Black Lung Rep. 1-199 (1981), that construed section 727.203(b)(3) as
requiring a claimant to be totally disabled as a result of coal mine employment.
The ALJ concluded that Bernardo's presumptive disability was rebutted "under
Section 727.203(b)(3), as the evidence reflects that the total disability of the
Claimant is not in and of itself the result of pneumoconiosis but rather is a
combination of his age, hypertension, angina, and pulmonary disease." App. at
14 (emphasis added).

Bernardo appealed the ALJ's decision to the Benefits Review Board. The
Board, without discussing the ALJ's interpretation of the regulation, found the
ALJ's opinion was supported by substantial evidence because Dr. Nicolaysen's
report, read in conjunction with Dr. Otoshi's report, allowed the ALJ to find
that "claimant's respiratory disease is not in and of itself disabling." App. at 18.
The Board continued, "while claimant does have some impairment due to

restrictive lung disease ... and while that impairment may be due to
pneumoconiosis, the Director has nonetheless rebutted by showing that
claimant's restrictive lung disease is not disabling." Id.
8

On appeal, the Director concedes that "the legal analysis of the applicable
regulations in both the ALJ and Board decisions is flawed" but argues that this
court should nonetheless affirm the denial of benefits for other reasons which
are supported in the record. Director's Brief at 17.

II.
9

The interim presumption on which both the ALJ and the Board focused was
that established by a regulation which provides that a miner who engaged in
coal mine employment for at least 10 years will be presumed to be totally
disabled due to pneumoconiosis if one of certain described medical
requirements is met. 20 C.F.R. Sec. 727.203(a). The regulation also provides
that once established, the interim presumption can be rebutted if, considering
all relevant medical evidence, the evidence establishes: (b)(1) the claimant is
doing his usual coal mine work or comparable work and gainful work; (b)(2)
the claimant is able to do his usual coal mine work or comparable and gainful
work; (b)(3) the total disability (or death) of the miner did not arise in whole or
in part out of coal mine employment; or (b)(4) the miner does not or did not
have pneumoconiosis. 20 C.F.R. Sec. 727.203(b).

10

The ALJ and Board erred in this case by finding rebuttal under Sec. 707.203(b)
(3). The (b)(3) provision for rebuttal is concerned with the source of disability.
In Jones, the Board erred in construing section 727.203(b)(3) as related to the
degree of disability, i.e., total, that must arise from coal mine employment. See
Jones, 3 Black Lung Rep. at 1-208-1-209. That aspect of Jones has been
overruled by every circuit which has considered it, including this one. See
Carozza v. United States Steel Corp., 727 F.2d 74 (3d Cir.1984). The Director
concedes that "[r]eference to, and reliance on, Jones as the legal basis for
denying benefits ... has merely confused the rebuttal analysis." Director's Brief
at 18 n. 9. It follows from the Director's concession and from our precedent that
the decision of the Board cannot be sustained on the basis on which it was
rendered, i.e., that the Director had rebutted the interim presumption under (b)
(3).

11

The Director argues that we may sustain the decision denying benefits for one
of two reasons. He argues that the interim presumption should never have been
applied because Bernardo's ventilatory function study did not conform to the
mandatory standards of 20 C.F.R. Sec. 410.430, and second, that even if

Bernardo were entitled to the interim presumption, that presumption is rebutted

since the record is sufficient to establish that Bernardo "is able to do his usual
coal mine work or comparable and gainful work" within section 727.203(b)(2).
12

The evaluation of the medical evidence is a task that Congress allocated to the
administrators in the first instance. In Director, Office of Workers'
Compensation Programs v. North American Coal Corp., 626 F.2d 1137 (3d
Cir.1980), this court refused to consider an argument made by the Director on
appeal that had not been presented to or considered by the Board. We stated:

13

It is generally recognized that under the doctrine of exhaustion of administrative

remedies a court should not consider an argument which has not been raised in
the agency proceedings which preceded the appeal, absent unusual
circumstances. As the Supreme Court announced over thirty years ago in
Unemployment Compensation Commission of Territory of Alaska v. Aragon,
329 U.S. 143, 155, 67 S.Ct. 245, 251, 91 L.Ed. 136 (1946):

14reviewing court usurps the agency's function when it sets aside the administrative
A
determination upon a ground not theretofore presented and deprives the Commission
of an opportunity to consider the matter, making its ruling, and state the reasons for
its action.
15

Id. at 1143. See also Sea-Land Service, Inc. v. Director, Office of Workers'
Compensation Programs, 552 F.2d 985, 987-88 n. 1 (3d Cir.1977). We cannot
speculate what arguments Bernardo might have raised before the Board had the
ALJ adopted the position now advanced by the Director. We are unwilling to
deprive him of his right to appeal to the Board, and to circumvent the Board's
consideration of those issues. We believe that a remand is the most appropriate
course.

16

For the same reason, we will not consider Bernardo's contention that he is
entitled to the statutory presumption of disability. The statute provides that for
claims filed on or before December 31, 1973, a miner who was employed for
15 years or more in an underground coal mine will be considered presumptively
"totally disabled due to pneumoconiosis" when a chest x-ray "is interpreted as
negative with respect to requirements of paragraph (3) of this subsection, and if
other evidence demonstrates the existence of a totally disabling respiratory or
pulmonary impairment." 30 U.S.C. Sec. 921(c)(4). Bernardo argues that
rebuttal of the statutory presumption will be more difficult for the Director than
rebuttal of the regulatory presumption.

17

Although the Director concedes that Bernardo worked in coal mine

17

Although the Director concedes that Bernardo worked in coal mine

employment more than the 15 years requisite to invoking the statutory
presumption, the Director argues that Bernardo may not raise the issue of the
presumption provided by the statute for the first time on appeal. There is some
irony in the Director's position since he seeks, at the same time, to have us
sustain the Board's decision on the basis of an argument raised for the first time
on appeal, i.e., the rebuttal of the interim presumption pursuant to 20 C.F.R.
Sec. 727.203(b)(2). As noted above, we believe that all of these issues,
including whether the arguments raised by either of the parties have been
waived, should be addressed to the Board.

18

For the foregoing reasons, we will grant the Petition for Review and remand to
the Board for further proceedings in accordance with this opinion.

Hon. Glenn E. Mencer, United States District Court for the Western District of
Pennsylvania, sitting by designation